Professor John McHale:

It has become a bit of a cliché to talk about the uncertainties surrounding the Brexit. What we have tried to do in our recent report is consider a number of different scenarios. We looked at a baseline scenario, which is probably not too far from the best guess and in that context, the impact of Brexit, at least in terms of its implication for budgetary policy, is quite limited. Under that baseline scenario, we lose around 1% of growth over a two year period but that has a fairly minimal impact on the fiscal space and therefore, on what one can do in terms of budgetary policy. However, the point about Brexit is that we really do not know what will happen. One can imagine much worse outcomes so we also looked at a more adverse scenario - even worse scenarios are possible - under which there is a persistent loss of 0.5% of growth over a decade or more. That eats into the fiscal space and would have implications for budgetary policy. We tried to give some idea of how Brexit might have implications for budgetary policy.